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What are the annual and lifetime gifting limits for 2024?

On Behalf of | Jan 26, 2024 | Estate Planning

Gifting is a strategic tool used in estate planning to reduce the taxable value of an estate, which can be particularly beneficial for wealthier residents of Rhode Island. By carefully gifting assets during one’s lifetime, an individual can effectively decrease the size of their estate, potentially reducing the estate tax burden upon their passing.

In 2024, the IRS updated limits for annual and lifetime gifting. These restrictions play a crucial role in how gifting can be used to manage estate taxes effectively. Therefore, it’s important to remain informed about this and future changes as adjustments in the Tax Code may warrant estate planning adjustments as well.

Annual gift tax exclusion

The annual gift tax exclusion for 2024 is $18,000 per recipient. This means an individual can give up to $18,000 to any number of people each year without incurring gift tax or even having to report the gift to the IRS. This limit effectively doubles for married couples, allowing them to gift up to $36,000 per recipient annually without tax implications. Utilizing this exclusion each year can significantly reduce an estate’s size over time, lowering potential estate taxes.

Lifetime gift and estate tax exemption

In addition to the annual exclusion, there is a lifetime gift and estate tax exemption. This limit includes the total of all gifts given over the lifetime that exceed the annual exclusion limits and the assets left to heirs at death. For 2024, this exemption amount is $13.61 million per individual. This means that over one’s lifetime, up to $13.61 million can be gifted tax-free. For married couples, they can combine their exemptions for a total of $27.22 million.

Impact of gifting on estate taxes in Rhode Island

Using these gifting limits strategically, Rhode Island residents can reduce their estate tax liabilities. The key is to plan these gifts to maximize the use of both the annual and lifetime exclusions. Regular gifting up to the annual exclusion amount can gradually reduce the size of the estate without diminishing the lifetime exemption, while larger gifts can be planned to utilize the lifetime exemption wisely.

It’s always advisable for individuals to consult with a legal representative to understand how these federal gifting rules interact with Rhode Island’s specific estate tax laws. This effort can help to ensure that their gifting strategy is compliant and optimized for their financial situation and estate planning goals.